Mentoassociates.com – Legal Articles

1.Company is an artificial legal person. Partnership is not a legal person.

2.Company has perpetual succession. Partnership firm does not have perpetual succession.

3.Company is created by registration under Companies Act. For a partnership firm registration is not compulsory. It is guided by Indian Contract Act and Partnership Act.

4.Private Limited Company shall have at least 2 members and maximum 50 members. Partnership firm shall have at least 2 members and maximum 20 members and for banking business, maximum 10 members.

5.In a private limited company, liability of the members can be limited by shares or by guarantee. Liability of members is unlimited in a partnership firm.
   
6.A member is not an agent of company or of other members. Partner is an agent of firm and other partners.

7.Member cannot bind company by his act.  Partner can bind firm by his act. 
                                                       
8.Ordinary members cannot take part in management of a company. Only director members can take part in management.  Partners can take part in   management of a firm.

9.Private limited company shall have a minimum paid up capital of   Rupees 1,00,000/-(Rupees One Lakh Only) and public limited  company of Rs. 5,00,000/- (Rupees Five Lakh Only). There is no minimum paid up capital for a partnership firm.

10.Shares of a private limited company can be transferred with ease. Partner can transfer his share but the assignee does not become a partner. He is only entitled to share of Profits.

11.A company is an entity distinct from its members. It may own property, make contracts, sue and be sued in its own name.  The property of a firm is   owned by the partners. It can also sue and be sued in the firm’s name and   partners can also be sued individually.

12.A single member cannot wind up a company.  A partnership may be dissolved by any partner at any time.
                                                                  

1. The memorandum of every company shall state:
· The name of the company with Limited (for a Public limited company) and with Private Limited (for a Private Limited company) as the last word   .
· The state in which the registered office of the company is to be situated.
· The main objects of the company and the incidental or ancillary objects.
· Other objects of the company.
· In the case of companies, with objects not confined to one state, the state to whose territories the objects extend.
· The memorandum of a company limited by shares or by guarantee shall also state that the liability of its members is limited.
· The memorandum shall also state the amount of share capital with which the company is to be registered and the division there of into shares of a fixed amount.  No subscriber of the memorandum shall take less than one share and each subscriber of the memorandum shall write opposite to his name the number of shares he takes.

4. For a company to change the place of its registered office from one place to another within a state, such change has to be confirmed by Regional Director. Once the change is confirmed by the Regional Director, the company shall file a certified copy of the confirmation given by the Regional Director together with a printed copy of altered memorandum before the registrar of the company. Thereafter the registrar of company shall register the said change.    

There is a trend world over, in particular among companies and corporate not to drag disputes into long drawn courtroom battles. There comes the significance of Arbitration, Mediation, Conciliation and such alternate disputes resolution mechanisms. Here is the added advantage of savings in time as well as the cost of proceedings. Moreover the parties settle the matter in a win- win spirit.

The Arbitration and Conciliation Act, 1996 governs the law relating to domestic arbitration, international commercial arbitration and enforcement of foreign arbitral awards in India. Further it governs the law relating to conciliation. This act has taken into account the UNCITRAL Model Law on International Commercial Arbitration adopted by UN in 1985 and the UNCITRAL Conciliatory Rules (1980).

As per the Arbitration and Conciliation Act, 1996, an arbitration agreement is an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a legal relationship, whether contractual or not. An arbitration agreement may be in the form of an arbitration clause in a contract or it may be a separate agreement. Further an arbitration agreement shall be in writing.

If either of the disputing parties approaches a Court for adjudication of the dispute, in spite of the presence of an arbitration agreement, then the Court has the power to refer the parties to arbitration. The parties to an arbitration proceeding are entitled to approach the jurisdictional court for urgent and interim measures of protection.

The parties are free to determine the number of arbitrators; however the same shall not be an even number. The arbitrator may be a person of any nationality. If there is any justifiable doubt as to the independence or impartiality of an arbitrator, then, he shall not become an arbitrator.

The arbitrational tribunal is also entitled to pass interim measures of protection or to order a party to provide appropriate security. In arbitration proceeding, the parties shall be treated with equality and each party shall be given full opportunity to present his case.

Parties are free to fix the place of arbitration. If there is a disagreement between the parties regarding the place of arbitration, the same shall be decided by the arbitrational tribunal. The proceedings can be conducted in any language as determined by the parties.

The Jurisdiction, powers and authority of the Commission may be exercised by Benches which shall be constituted by the Chairperson .The Bench shall consists of not less than two members.

On receipt of a complaint or a reference from the Central Government, or a Statutory authority or on its own knowledge or information, the Commission is of the opinion that there exists a prima facia case, shall direct the Director General to cause an investigation to be made into the matter.

The Commission can levy penalty for contravention of its orders, failure to comply with its directions, making of false statements or omission to furnish material information, etc. Further the Commission can levy upon an enterprise a penalty of not more than 10% of its average turnover for the last three financial years. It can also order division of dominant enterprises. It will also have power to order demerger in the case of mergers and amalgamations that adversely affect competition.

The act provides for a fund called the Competition fund. The grants given by the Central Government, fees received under the Act and costs realized by the Commission and application fees charged will be credited into this Fund.

The Indian Partnership Act, 1932 regulates the law relating to partnership in India. Partnership is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. The persons who have entered into partnership with one another are called individually ”partners” and collectively a “firm” and the name under which their business is carried on is called the “firm name.” The relation of partnership arises from contract and not from status. If there is no provision for the duration or determination of a partnership, such a partnership is called a “partnership at will”.

The Partners are bound to carry on the business of the firm to the greatest common advantage, to be just and faithful to each other and to render true accounts and full information of all things affecting the firm to any partner. Every partner is liable to indemnify the firm for any loss caused to it by his fraud in the conduct of the business of the firm.

Every partner has a right to take part in the conduct of the business and every partner is bound to attend diligently to his duties in the conduct of the business. Any differences arising as to ordinary matters connected with the business may be decided by a majority of the Partners. However, a change in the nature of business can be decided only with the consent of all the partners.

The Karnataka Shops and Commercial Establishment’s Act, 1961 provides for the regulations of conditions of work and employment in shops and commercial establishments. According to section 4 of this Act, the employer of every establishment, shall send to the Inspector of the area concerned, a statement, with the required fee, containing the information regarding name of the employer and manager, address of the establishment, name of the establishment, and such other particulars. On receipt of the said statement, the Inspector shall register the establishment and issue a registration certificate, which shall be prominently displayed in the establishment. A registration certificate issued so, shall be valid for 5 years and thereafter it need to be renewed.

Under section 2(u) of this Act a “Shop” is defined as “Shop means any premises where any trade or business is carried on or where services are rendered to customers, and includes offices, storerooms, godowns or warehouses, whether in the same premises or otherwise, used in connection with such trade or business”. Hence a bare reading of the provisions of the act makes it clear that offices, godowns and warehouses used in connection with any trade or business are liable for separate registration under the Act.

As per section 4 of the said act, the liability to obtain the registration of an establishment lies on the Employer. Section 2(h) of the act defines Employer as follows “Employer means a person having charge of or owning or having ultimate control over the affairs of an establishment and includes members of the family of an employer, a manager, agent or other person acting in the general management or control of an establishment”. Hence it is crystal clear that the Registration Certificate needs to be obtained in the name of the employer or the owner of the business. Even if the business is being run on the rented premises, the Registration Certificate needs to be obtained in the name of the employer or the owner of the business and not in the name of the owner of the premises.

As per section 6-A of the said act, every employer employing any person, in connection with his establishment, shall issue an appointment order in writing, within 30 days of his appointment.

No employee in any establishment shall be required to work for more than nine hours on any day any forty-eight hours in any week. Further the total number of hours of work including overtime shall not exceed ten hours in any day. It is further provided that the total number of overtime hours worked by an employee shall not exceed fifty in a period of three continuous months.

Further no young person shall be allowed to work in any establishment for more than 5 hours a day. Here a young person means a person between fourteen and eighteen years.

As per section 9 of the Act, no employ in any establishment shall work for more than five hours at a stretch. After five hours of work, an employee shall be given at least 1 hour of rest.

Every establishment shall remain close for one day of the week. The said day shall be displayed on a notice, in a conspicuous place in the establishment. Further every employee in an establishment shall be given at least one whole day in a week as holiday for rest.

No child shall be required or allowed to work in any establishment. Further no women or a young person shall be required to work in an establishment during nighttime. However, the State Government shall exempt establishment of IT or ITES from the application of this provision.

No employer shall remove or dismiss an employee who has put in service under him continuously for a period not less than six months, except for a reasonable cause and unless and until one month previous notice or pay in lieu thereof has been given to him. Provided that where misconduct of an employee is brought on record with proof at an enquiry held for the purpose, he shall not be entitled to the notice or pay in lieu of such notice.

With the advent of globalization, the Indian economy was opened up removing controls and a policy of liberalization is being followed in every aspects of Indian economy. As a result the Indian market was forced to competition from inside and outside. It was felt that the Monopolies and Restrictive Trade Practices Act 1969, was outdated to match with the international economic developments and the necessity was felt to enact a new Law to promote competition and to curb monopolies.

The Act provides for the establishment of a Competition Commission to prevent practices, having adverse effect on competition to promote and sustain competition in markets, to protect the interests of consumers and to ensure freedom of trade carried on by other participants in markets, in India, and for matters connected therewith or incidental thereto. As per the Act no enterprise shall abuse its dominant position in the economy and also it prohibits combinations by enterprises which are likely to cause an adverse effect on competitions with in the relevant market in India.

The Competition Commission shall consist of a chairperson and not less than two and not more than ten members to be appointed by the Central Government. The Commission can enquire into contraventions of the provisions of the Act, on the basis of complaints received by it or on a reference made to it by the central or state government or a statutory authority.

The Jurisdiction, powers and authority of the Commission may be exercised by Benches which shall be constituted by the Chairperson .The Bench shall consists of not less than two members.

On receipt of a complaint or a reference from the Central Government, or a Statutory authority or on its own knowledge or information, the Commission is of the opinion that there exists a prima facia case, shall direct the Director General to cause an investigation to be made into the matter.

The Commission can levy penalty for contravention of its orders, failure to comply with its directions, making of false statements or omission to furnish material information, etc. Further the Commission can levy upon an enterprise a penalty of not more than 10% of its average turnover for the last three financial years. It can also order division of dominant enterprises. It will also have power to order demerger in the case of mergers and amalgamations that adversely affect competition.

The act provides for a fund called the Competition fund. The grants given by the Central Government, fees received under the Act and costs realized by the Commission and application fees charged will be credited into this Fund.

DIN (Director Identification Number) is a unique identification number for a person who is a director of a company or who intends to become the director of a company. It is mandatory for e- filing of certain company related documents. It is even mandatory for directors of Indian companies who are not citizens of India. Hence this is the first pre requisite for a person intending to set up a company. However a single DIN is enough for a person who is a director of several companies.

The Ministry of Company Affairs grants DIN to individuals. The application can be obtained on line. Initially a provisional DIN will be given to an applicant. The provisional DIN can be used for e fling until DIN is approved and activated by MCA DIN Cell. Once a provisional DIN is obtained, the applicant shall apply to MCA in the prescribed application form along with photographs and duly attested photocopies of identity and residence. The MCA Din Cell will process the form and on approval the DIN confirmation and activation letter will be sent to the applicant. An e mail will also be sent to the applicant in this regard. The status for the DIN application can be checked in the MCA portal, on line.